Fianna Fáil Spokesperson on Finance, Michael McGrath has warned that the apparent short term benefits of Personal Contract Plans (PCPs) used to finance motor purchases may leave motorists exposed and could present a systemic risk for the firms financing the arrangement if consumers get into financial difficulty and default on the arrangement.
Deputy McGrath added that he is very concerned at the lack of regulation of PCPs.
“PCPs are similar to Hire Purchase Agreements (HPA), whereby monthly payments are made and ownership is passed to the customer after the final payment is made.
“However, unlike HPAs, these PCPs require a final lump sum amount, sometimes amounting to many thousands of euro to be paid at the end of the period.
“As a result of the need to pay a lump sum at the end of the contract, the monthly repayments can be considerably lower than repayments under a HPA for the same loan amount and this is of course holds a certain attraction for the consumer.
“A major issue I have with PCPs is the lack of regulation of these contracts with neither the Competition and Consumer Protection Commission or the Central Bank of Ireland acting as a regulator. The fact that the Consumer Protection Code does not apply to PCPs is a major concern.
“This is deeply worrying considering that, after a mortgage, these types of contracts are some of the biggest financial commitments a person can make. What’s clear is that the same level of protection is not being offered to consumers as with other financial products.
“Within the world of finance, data is crucial yet the Department of Finance does not even collate information and data on this area. I have written to the Governor of the Central Bank and the Chairperson of the Competition and Consumer Protection Commission to seek clarification on these issues.
“The incoming Minister for Finance must pay attention to this issue and ensure that the industry is adequately regulated and customers are protected”, concluded McGrath.